Many rewards are tied to an employee’s base salary as a percentage.
Here are some examples:
· X% of base salary = target bonus
· X% of base salary = target long-term incentive
· X% of base salary = shift differential
· And “X% of base salary” is often used to calculate call-back premium pay, holiday/weekend premium pay, hazard pay, on-call pay, or a geographic differential pay.
We know that when pay inequities exist it is often in the base salary. So, it makes sense to stop doing calculations off that number.
Employers are just causing other rewards to be inequitable if they use an employee’s base salary in the calculation.
Instead, I am starting to see this:
· X% of the base salary range midpoint = $X target bonus for all employes in Pay Grade/Job Level 10
· Or all employees in Pay Grade/Job Level 10 have a target bonus of $X
The same approach can be used for the target long-term incentive or target sales commission.
Differential and premium pay can be “plus $X.XX” instead of “X% of base salary.”
I have not yet seen employer provided life insurance change from “X% of base salary.” But I am assuming that will eventually happen too.
Are you starting to make this change in your rewards calculations?
If not, add it to your list of things to consider so you stop making pay inequities worse.
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